Mechanics of a Sale-Leaseback in a LBO
If anybody has worked on a deal that was underwritten with a sale-leaseback, it would be great to understand how it worked. What did the process look like, and how did it make the transaction more attractive?
Bump interested as well.
Has the effect of potentially boosting IRR and de-risking upfront.
Trade off might be long-term multiple decrease at exit so have to weigh up value of estate vs. multiples including freehold.
Thanks for the insight. How would this impact the exit multiple?
Do these SLB agreements ever come with purchase options that give the company owner the right to purchase the property at the end of the lease? Perhaps this can mitigate exit multiple compression.
Regarding (4), do you have any precedents I could use?
Thank you!
Why would a purchase option for the next buyer mitigate multiple compression? If the next buyer wants to repurchase the property and they would need to pay the property-owner for it, they're not going to pay you, the owner of the opco, a larger purchase price for that privilege...
Back to the initial question - why would the multiple compress? I assume it would be related to the level of control around property. A purchase option at lease expiration solves this.
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